Will signals of a failing economy cause the Fed to render even more monetary stimulus?
*Financial Times, by Alan Rappeport, July 20, 2010
”Builders continued to suffer in June as the stalling US housing market reduced new residential construction to its slowest rate in eight months.
US housing starts fell by 5 per cent to an adjusted annual rate of 549,000 last month, commerce department figures showed on Tuesday. That was a bigger fall than Wall Street analysts had projected and left starts down 5.8 per cent from the same month a year ago.
The June drop was an improvement from May, when housing starts plunged by 14.9 per cent in the wake of the expiry of a government stimulus for the sector. Driving the downturn last month was a plunge in new construction for multi-family dwellings, while construction for single-family homes slipped modestly.
‘This report confirms last month’s message of just how important government manipulation efforts were to supporting housing activity in the recent past,’ said Joshua Shapiro, chief US economist at MFR, of the expired first-time homebuyer tax credit. ‘While we are unlikely to return on a sustained basis to severely depressed activity levels seen a year and more ago, neither are we likely to return any time soon to the levels that were temporarily reached due to the tax credit programme.’
New home construction has been hampered by a glut of housing already on the market at reduced rates due to foreclosures and distressed sales. Compared with their housing boom peak in 2006, starts are off by 76 percent.”
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